These Chinese Consumers Are Splurging. Little Luxuries Are Big Business. — Barrons.com

By Tanner Brown

China's shoppers aren't rushing back to the malls, but they are still buying — just not in ways economists expected. In Chengdu, one office worker says she skipped summer fashion purchases but shelled out for a new washing machine. In Wuhan, a father says his family cut down on restaurant meals for months to save up for a vacation abroad.

Stories like these are showing up in the data, too. Retail sales overall grew only 3.4% in August, well below prepandemic norms. Yet sales of durable goods like appliances and furniture have soared at double-digit percentage rates, and domestic travel has exceeded 2019 levels. Consumer price inflation, meanwhile, slipped 0.4% last month, underlining just how cautious households remain with everyday purchases. These numbers illustrate Chinese consumers' diminished confidence as the economy continues to sputter in nearly every area, with metrics for factory output, housing sales, and unemployment all worsening in data released Friday.

The result is a new kind of consumer: China's "bifurcated shopper." These consumers are trading down on daily consumption, while selectively splurging on goods and experiences seen as long-lasting or meaningful. For investors, that divide matters. It points to clear winners in the consumer space — and just as clearly, to the losers.

Durable Goods Defy the Gloom

Big-ticket home products have become unlikely bright spots in the world's second-largest economy. In June, retail sales of household appliances and audio-video equipment surged 32.4% year over year, while furniture rose nearly 29%, government data show. The momentum carried into July, with appliance sales still up almost 29% year over year and furniture up more than 20%.

Some of the boom reflects Beijing's subsidy programs, which encourage consumers to trade in older appliances and buy energy-efficient replacements. But analysts say households are also making strategic choices.

"Chinese shoppers are increasingly price-sensitive but still willing to pay for quality where it delivers long-term utility," said Jason Yu, Greater China managing director at Kantar Worldpanel, in a report on fast-moving consumer goods.

For appliance makers such as Midea and Haier Smart Home, and retailers like Gome Electrical Appliances, the trend could soften the blow from an otherwise cautious consumer environment.

Where Consumers Are Cutting Back

At the same time, everyday categories are under strain. Food prices dropped 2.6% in August, led by a sharp fall in pork prices, which dragged headline CPI lower. Sales of garments and cosmetics have been sluggish, reflecting households' reluctance to spend on nonessentials.

"I've stopped buying new clothes this summer, but we did replace our old washing machine," said Wang Yue, a 34-year-old office worker in Chengdu. "It feels safer to spend on something that will last 10 years, not a new outfit I'll wear twice."

The selective approach echoes patterns from previous downturns, when Chinese households shifted spending into assets they believed preserved value. What's different now is the mix of categories benefiting: not just gold and jewelry, but also home electronics, sporting goods, and domestic travel.

Travel and Experience Rebound

Experiences are another pocket of strength. The number of domestic trips in the first half of 2025 was about 18% higher than in 2019, according to a McKinsey report. Outbound and inbound flights have also surpassed prepandemic volumes. For service providers — such airlines, hotels, and online travel platforms like Trip.com — the rebound offsets weakness elsewhere.

"We haven't traveled abroad in years, so this summer we went to Thailand with our two kids," said Liu Qiang, a 41-year-old engineer in Wuhan. "We cut down on dining out for months to save, but the family trip felt worth it."

Younger consumers, meanwhile, are gravitating toward concerts, wellness festivals, and cultural experiences. That shift is helping China's beleaguered entertainment sector, where box office sales and live music events have bounced back sharply.

Policy Push to Stimulate Spending

Policymakers are taking notice. In recent months, Beijing has rolled out loan-interest subsidies for consumers and service providers, part of an effort to reduce borrowing costs and encourage spending. Trade-in incentives for home appliances, smartphones, and cars are another lever. Premier Li Qiang reiterated in August that stimulating consumption remains a priority.

But economists caution that the measures are unlikely to deliver a broad-based boom as long as households remain worried about jobs and property values. The housing downturn continues to erode household wealth: New-home prices in major cities fell again in August, prolonging a slump that began in 2021.

"Consumer sentiment remains weak, reflecting concerns over income growth and the property market," said Ting Lu, chief China economist at Nomura, in a September client note.

Implications for Investors

For investors, the consumption divide is critical. Companies tied to everyday goods may struggle, while firms selling durable appliances, travel services, or "affordable luxury" could outperform. Domestic appliance makers and online travel platforms appear best positioned, while multinational consumer brands may face more headwinds if they cannot adapt to Chinese shoppers' selective behavior.

The challenge for Beijing is turning pockets of strength into broader demand. Until households feel secure about jobs and housing, they are unlikely to open their wallets widely. But the bifurcated shopper is already reshaping the consumption landscape — and offering a road map for where growth may be found.

"Right now I won't buy a new phone unless it's on discount," said Chen Li, a 27-year-old designer in Shenzhen. "But I did renew my gym membership — health is more important."

In a slowing economy, China's consumers are signaling a new hierarchy of value. For investors, the winners will be those who read it correctly.

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